Volkswagen accuses Suzuki of breaking contract

FRANKFURT: Volkswagen accused Japan's Suzuki of violating their near two-year old partnership and gave it an ultimatum of several weeks time to fix the situation, marking a new low in relations between the two carmakers.

VW said in a statement on Sunday that it viewed a deal by Suzuki to source diesel engines from another rival, Italy's Fiat, as a contractual breach.

"Suzuki has now been given a period of several weeks to remedy the infringement. Volkswagen considers this step regrettable, but necessary, and has offered to discuss the matter with Suzuki," it said.

A spokeswoman for Volkswagen said this step "does not mean the end of the partnership" and that the company was still very much interested in continuing the alliance.

"We will have to see now how Suzuki reacts and then we will discuss the next steps to be taken," she said.

The spokeswoman added Volkswagen did not intend to either sell or reduce the 19.9 percent stake in Suzuki it agreed to purchase in December 2009 as part of a strategic partnership with the maker of the Jimny and Grand Vitara.

Copyright Reuters, 2011